Blog | Real Estate
How to Find Deeply Discounted Properties
March 24, 2015
How to Find Deeply Discounted Properties
There will always be a real estate market. In a civilized world, a roof over your head is as essential as food, clothing, energy, and water. Real estate investors are essential to keeping this vital human need available at a reasonable price.
There are many different ways a person can participate and prosper with real estate. For most people, their only real estate investment is where they live. Their home is their biggest investment. In true investor vocabulary, flipping is known as speculating or trading. Some people call it gambling. While flipping is one method of investing, there are many, more, less risky ways to do well with real estate. Investing in real estate is much smarter rather than flipping, speculating, or gambling.
I am sick and tired of financial experts giving advice on real estate, especially when they do not actually invest in real estate. So I have gone out and found some great real estate investors, who are teachers, to educate you. Matt Theriault is such an investor.
Matt Theriault:
Have you ever thought about your job description as a real estate investor? In a nutshell, it’s to make a profit. I’ll frequently add on to that description, “while not hurting anyone in the process,” but your job is to make a profit. The investor mantra “buy low, sell high” will get you through here just as well as it would anywhere else in the business world. So, in order to “sell high” and realize your profit, you must first learn to “buy low.” The investor that can consistently find real estate “deals” controls his financial destiny. The better and more often the deals the investor finds, the sooner that investor can arrive to their desired financial destination.
We’ve found discounted properties to exist in three different realms, and certain skill sets and resources are required to operate within these realms and find deals.
Realm #1 –
The first realm where you can find deals doesn’t require much skill at all. If you have a basic real estate investing education, a property analysis calculator, and the patience of Job, deals can be found. The resources found inside this first realm are commonly the Multiple Listing Service, a slue of real estate websites and classified ads, both online and off. Although many deals can be found here, due to the public visibility and accessibility of these resources, expect the “real deals” to be few and far between.
Realm #2 –
The second realm where you can find a deal requires an above average investor education, a fair amount of real world real estate experience, an influential professional network and typically a fat wallet. This is where your “good ol’ boys” hang out, and their primary sources for deals are auctions, banks and some government institutions. Deep discounts can be found here, but you’re likely going to need some friends in high places and lots of cash “always-at-the-ready” for your deals to flow consistently.
Realm #3 –
The third realm where deals are found is where the deepest discounted properties exist for the average investor, and this is where my company primarily finds its deals. We operate at a high level in this realm and as a result we can share a considerable portion of our discounts with our clients. To operate effectively within this realm, two important shifts must happen:
- Shift #1 is from that of “deal analyzer” to “deal marketer.”
- Shift #2 is from that of “profit maker” to “problem solver.”
Don’t get me wrong… realizing a profit is still the objective, but shifting to the mindset of one that solves problems is more empowering in this realm, AND more profitable. Once you realize that distressed property owners will exchange peace of mind for equity (and frequently a lot of equity), the shifts required start to make sense. Distressed property owners are your resource in this realm, and distress comes in three forms. 1) Property Distress, 2) Financial Distress, and 3) Personal Distress. Distressed property owners are not easy to find. They only represent 5% of all real estate transactions. They aren’t on the Multiple Listing Service, they aren’t at the auctions, they are not on the market at all. “Marketing” is used to find these off-market deeply discounted deals. Once found, an exchange of “peace of mind” for equity can be negotiated.
Those are the three realms of where discounted properties are found. Which of these three realms seems the most realistic for you to dwell? For many, the answer is none of them. Some people don’t know how, some people don’t have the time and some people simply don’t have the desire to learn, make the time or do the work. But! They all still want monthly cash flow from real estate, and that’s what my company does. Our clients leverage our experience, time, personnel and effort so that they can still get the result, monthly cash flow.
Original publish date:
March 24, 2015